Question

United Snack Company sells 40-pound bags of peanuts to university dormitories for $54 a bag. The...

United Snack Company sells 40-pound bags of peanuts to university dormitories for $54 a bag. The fixed costs of this operation are $589,160, while the variable costs of peanuts are $0.32 per pound.

a. What is the break-even point in bags?
  

b. Calculate the profit or loss (EBIT) on 6,000 bags and on 19,000 bags.
  

Bags Profit/Loss Amount
6,000
19,000


c. What is the degree of operating leverage at 18,000 bags and at 23,000 bags? (Round your answers to 2 decimal places.)
  

Bags Degree of Operating Leverage
18,000
23,000


d. If United Snack Company has an annual interest expense of $32,000, calculate the degree of financial leverage at both 18,000 and 23,000 bags. (Round your answers to 2 decimal places.)
  

Bags Degree of Financial Leverage
18,000
23,000

e. What is the degree of combined leverage at both a sales level of 18,000 bags and 23,000 bags? (Round your answers to 2 decimal places.)
  

Bags Degree of Combined Leverage
18,000
23,000

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